Michael Hartshorn: It continues to be because the vast majority of the new stores are Ross. That said the stores that we are opening for dd’s we expect them to be similar to historical sales levels because they are in the existing markets. But overall 60% to 65% of a comp.
Corey Tarlowe: And then just a brief follow-up other than new stores. What areas are you investing in the CapEx and how are you thinking about leveraging AI in your business?
Michael Hartshorn: So first on where else we’re investing about 40% of the capital DC that we’re going to start construction on later this year on our next distribution center. So 40% of that capital this year is on increased DC capacity. So opening, plan open a new DC in early ’25 in Arizona and we have another one DC that we’re going to start construction later this year on a next destruction center. So 40% of that capital this year is on increase DC capacity. AI, I would say there’s two parts of AI. We already use AI in some of the automated parts of our business. I think generative AI will be a journey for us like it is for others, but it is something we’ll be looking at to find efficiencies in the business.
Operator: And the next question comes from the line of John Kernan with TD Cowen & Company.
John Kernan: Just going back to stores, Ross Stores banner grew 4% this year. I think that was the fastest store growth since pre-COVID, dd’s is up over 7%. How do we think about store growth, not just for fiscal 2024, but also beyond that and how that fits into your long-term store targets?
Michael Hartshorn: Sure. First of all, our long term store target hasn’t changed and that’s 2,900 Ross stores and 700 for dd’s. I think you’d expect about 100 stores a year depending on how the dd’s plays out beyond this. But I think we’re comfortable with the 75 Ross stores annually. That’s a good fit for us and we’ll see where the dd’s rollout after we get through our strategy.
John Kernan: You haven’t seen any long-term change in terms of competition for real estate, your peers in off price are growing a lot of stores too. I think there’s been concerns about some of the availability out there, but doesn’t sound like you have any concerns?
Michael Hartshorn: Well, there is, I would say there’s a lot of competition for our locations, but I’d say overall we feel good about the real estate landscape and have a healthy pipeline.
Operator: And the next question comes from the line of Laura Champine with Loop Capital Markets.
Laura Champine: It’s related to what the way we’re reading stores, which to us looks like you’re making a conscious decision to sharply control inventories to maximize profits and minimize markdowns. Are we reading that right? Or is this just a small sample size of stores?
Adam Orvos: Laura, are you just talking about inventory levels at year end? Is that your question?
Laura Champine: I’m talking about inventory levels that we’re seeing currently over the past couple of months in stores really post-holiday.
Michael Hartshorn: I would say post-holiday for us is really a clearance period. So it is our lowest inventories of the year and it happens to be our lowest sales period. So, we want to start off the year correctly. So it doesn’t surprise me that it would feel that way if you’re looking at the stores in January. I think as you progress through the spring. We manage our in store inventories based on turn, and we set it up if we can beat the plan then we can leverage markdown. So that’s the way we run the business and we try to beat the turn from the previous year.
Operator: And the next question comes from the line of Krisztina Katai with Deutsche Bank.
Krisztina Katai: I wanted to ask in terms of the competitive backdrop. Many of bigger general merchandise retailers still look very lean on inventory, I think especially when we look at apparel and certain discretionary categories as we head into the spring. So I was just curious how that’s sort of incorporated into your thinking on comps and maybe where you see some of the biggest opportunities in the first half to take share? Thank you.
Barbara Rentler: Kristina, I’m not 100% sure what exactly what you’re getting at exactly. Could you just say that again?
Krisztina Katai : Sure. It’s just that many of your bigger general merchandise peers are still planning inventories very cautiously and they’re sort of lean on inventories in many discretionary categories. So as you’re sort of planning your business, you’re looking at your good, better, best sort of assortment, maybe just how you’re thinking about position for spring and then heading into the summer?
Barbara Rentler: So the first part in inventory, as Michael just said, we plan our inventory based off of sales and churn. And so and we build that by business really bottom up just in terms of pure inventory level. And then we drive receipts. We have the inventory base we think we need and then we go to chase and we drive the receipts which drives the sales, which drives the profit. That’s from basic inventory. In terms of which categories, that’s a merchant driven strategy in terms of what businesses we want to go after, where we see the opportunity in the outside world, where we know we can show great value and where we can add assortment. So they’re kind of two different levels of thinking. And remember, it’s a flexible business model.
So if business really takes off and as we’ve started to beat our sales plans, we have the ability to take the inventory up or drive the inventory down because the model is flexible, the stores are flexible, and the products are flexible. So we go we start in with our base plan and then, again, built up for sales turn. And then and then we go then we react to what the customer is telling us. So it’s kind of fluid.
Operator: And our final question comes from the line of Jay Sole with UBS.
Jay Sole: Barbara, you talked that one of your goals for the year was taking market share. Is your expectation that you’re going to take market share from other off price retailers or department stores or maybe just a little bit of everybody?
Barbara Rentler: I just think, look, I just think there is market share to be had. I mean more stores keep closing, I mean, and there’s just less places for consumers to shop and our job is to satisfy the customer. And if we do that, there are consumers out there for us to pick up and to expand. So we want to be able to satisfy our current customers and get her to come back more. We want to be able to add additional customers because as we know, as there have been many store closures over the last few years, that’s also helped to fuel our price. So as that continues, this is a focus for us.
Operator: And there are no further questions at this time. And I’d like to turn the floor back over to Barbara Rentler for any closing comments.
Barbara Rentler: Thank you for joining us today and for your interest in Ross Stores.
Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
